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Consumer Are Shopping By The "Bag" Because They Can No Longer Afford The "Cart Or Basket"

Last week I posted a blog entitled “From Cart To Basket And From Basket To Bag: Part I. The blog focused on consumers changing purchasing pattern of Health and Beauty Aid products. This week’s blog focuses on the grocery industry.

During 2012, heat and drought across the country affected the production of many staple products such as corn, milk, beef and chicken. As commodities become scarce, consumers will experience higher prices in the grocery stores. In addition to difficulties experienced by consumers in the form of employment layoffs, home foreclosures, and/or lack of employment raises, the weekly food bill is hurting the family’s ability to thrive.

Case study of the Grocery Store Industry

Consumers have a wide variety of stores in which to purchase groceries. Some stores focus on price savings (e.g. Walmart, Aldi, and Costco); other stores focus on atmosphere and selection (e.g. Publix, Whole Foods). BIGinsight surveyed consumers nationwide, asking consumers their preference in grocery store. Consumers are segmented by income: those with a household income $50,000-$99,000 (n=2624) and those with a household income less than $50,000 (n=4266).

Walmart is the preferred grocer by 18.4% and 24.6% of consumers (household income $50,000-$99,000, <$50,000 respectively). Kroger is the second most popular grocery store with 7.6% and 7.1% of consumers shopping there on a regular basis (household income $50,000-$99,000, <$50,000 respectively). The other stores have far less percentage of consumers.

We also asked consumers to list the reasons for selecting a grocery store. Consumers are allowed to list multiple reasons. The reasons are tallied and listed on the table. It is not surprising that 76.3% of the sample list “price” as the number one reason for choosing a grocery store. The second reason is “location” (71.9%). “Selection”, although important at number three, is far below at 56.1%.

Let’s talk about consumers’ spending patterns. We looked at five monthly grocery spending categories: $25-$50/month; $51-$75/month; $75-$100/month; $100-$200/month and $201-$300/month. In all categories with the exception of $201-$300, consumers are spending less on groceries in 2012 than in 2008. This decline in spending pattern is despite the fact that the cost of groceries continues to escalate.

Implications

The data reveal that rising cost of groceries is taking its toll on everyone’s wallet. Price is more important than store atmosphere. Double coupons won’t influence a shopper if the entire food bill isn’t lowered. The number one driving force when deciding when, where and what to purchase at the grocery store is price. The bottom line matters to consumers. Consumers definitely realize the rising prices of groceries and the lack of additional funds in their wallets.

Consumers for the most part are not receiving raises. Many households are struggling to stretch the already thin household budget. Clearly many consumers are switching from a “cart to a basket and from a basket to bag.”

So what does this mean to the grocery store industry? For some, it may mean the difference between going out of business, survival and making a profit. Grocers need to identify methods to entice consumers into the store. Marketing efforts that include the words “low price”, “located near you”, and “wide selection” may help stimulate consumers into selecting your store. Wise strategic planning of the store’s merchandise is an obvious decision. Large retailers with enormous purchasing power will have important negotiating leverage as producers attempt to sell as much of the limited available merchandise as possible. Grocers who emphasis attributes other than price, location or selection should have a very good strategy to back up the plan. As for the consumer, they will continue to watch their pennies, nickles, dimes and dollars. Taking home a bag of groceries (as opposed to a basket or cart) may become the norm if grocery prices and the economy maintain its ugly tenure.

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